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Tax deduction for mortgage

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pgll

Junior Member
What is the name of your state? Colorado
Just finish mortgage on 1st house.
If I buy a 2nd house; in what cases can I deduct from Tax ?
2 options:
1. Buy house and rent it : can I deduct Interest on Mortgage?
2. Buy vacation house and Rent it but not 100%. can I deduct Interest on Mortgage?
3. Buy house and not rent it. can I deduct Interest on Mortgage?


Another Q: If I buy land ; what can I deduct ?
can i put a trailer on it then Deduct interes like Mortgage?

The idea behind all this is to reduce my income with deductions!
What other ideas other than house do you recommend to decrease income with deductions?

Thank You
 


HomeGuru

Senior Member
What is the name of your state? Colorado
Just finish mortgage on 1st house.
If I buy a 2nd house; in what cases can I deduct from Tax ?
2 options:
1. Buy house and rent it : can I deduct Interest on Mortgage?
2. Buy vacation house and Rent it but not 100%. can I deduct Interest on Mortgage?
3. Buy house and not rent it. can I deduct Interest on Mortgage?


Another Q: If I buy land ; what can I deduct ?
can i put a trailer on it then Deduct interes like Mortgage?

The idea behind all this is to reduce my income with deductions!
What other ideas other than house do you recommend to decrease income with deductions?

Thank You


**A: read IRS Schedule E instructions.
 

TinkerBelleLuvr

Senior Member
This will guide you thru the mortgage & second home mortgage:
http://www.irs.gov/faqs/faq-kw122.html

This will guide you to the happiness of being a landlord:
http://www.irs.gov/taxtopics/tc414.html
 

abezon

Senior Member
One comment about your plan to reduce your taxable inocme with deductions: you will never get ahead incurring an expense just so you can deduct it. The ability to deduct an expense is simply gravy & shouldn't have that big an effect on your investment decisions.

That said:
You can deduct (on Schedule A) the mortgage interest on your principal residence and one secondary home. The secondary home can be any structure with a kitchen & bathroom, including a boat or RV.
If you buy a rental home, you deduct the mortgage interest & other expenses on Schedule E. A net rental loss can usually be claimed on page 1 of your 1040, while you still claim the full standard deduction instead of itemizing. (Depending on your AGI, the net rental loss may have to be carried forward until years of less income.)
If you buy land, you can deduct the property taxes but not the mortgage interest unless you park a mobile on it permanently (hook up services, concrete pad, etc).
If you rent out a vacation home only part of the time, the rules get very complicated & deductibility of expenses can be quite limited.

Overall, you might be better off to put your extra monthly cash into the stock market & take the standard deduction instead of borrowing money to invest in more land. It depends on how land values are going to do in your area.

Another good way to reduce your income is to kick up your 401k contribution significantly. Again, you still get to claim the standard deduction.

I suggest you talk to your financial advisor about the benefits of various strategies.
 

pgll

Junior Member
Since I just paid off my 1st mortgage and need to fecrease my total AGI because i need to exercise some stock options that greatly increase my Taxes.
Any other ideas on Tax deductions ?
 

abezon

Senior Member
Go see a tax pro. There's a good chance you'll hit AMT when you exercise options. You might want to set up a plan where you exercise & sell some options, & exercise & hold others. You should also talk to a financial planner -- try to find one who is a Certified Financial Planner or at least has lots of experience with tax planning relating to options & AMT.
 

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